ch11_p2 - U denotes the United States Assume that BMW can...

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11_2. Suppose that BMW can produce any quantity of cars at a constant marginal cost equal  to $20,000 and a fixed cost of $10 billion.  You are asked to advise the CEO as to what prices  and quantities BMW should set for sales in Europe and in the U.S.  The demand for BMWs  in each market is given by: Q E  = 4,000,000 - 100 P E   and  Q U  = 1,000,000 - 20P U where the subscript   E   denotes Europe and the subscript  
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Unformatted text preview: U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what will the price be in each market? What will the total profit be? b. If BMW were forced to charge the same price in each market, what would be the quantity sold in each market, the equilibrium price, and the company’s profit?...
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This note was uploaded on 12/28/2009 for the course ECON 120 taught by Professor Walsh during the Fall '09 term at University of Illinois, Urbana Champaign.

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